Is Malaysia in the middle-income trap? symptoms, challenges and remedies

While Malaysia, an upper middle-income country, can be proud of its achievement with strong economic growth year after year, many of its citizens can barely cope with the increasing cost of living in the country. Middle income trap (MIT) is defined as a situation where a country has achieved the middle-income level such as Malaysia, yet is unable to attain high-income status, with the citizens are facing the burden of the increasing cost of living due to the mismatch between the increase in income and that of the cost of living, thus affecting the standard of living of the citizens. In 2008, the World Bank suggested that only 13 out of the 101 middle-income nations have actually evolved to become high-income economies. This paper aims to explore the symptoms and challenges facing Malaysia as a middle income country in its efforts towards a high income nation. Is Malaysia facing the middle-income trap? If so, how can Malaysia fully utilised its economic potentials using the rich economic resources and places itself at the same level as countries such as South Korea, Singapore and Hong Kong? This paper finds that the factors that hinder the progress towards high-income nation include low total factor productivity due to no transition from input-driven to productivity-driven, lopsided execution of the new economic policy and brain drain